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Guide to Buying Your First Vacation Rental in Florida Keys

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With approximately 120 miles of pristine white sand beaches, stunning sunsets, and around 1,700 unique islands connected by 42 bridges, the Florida Keys is a one-of-a-kind waterfront paradise that constantly lures holiday seekers from around the world.

It’s no wonder the Keys is a highly sought-after real estate market for vacation rentals. If you’re considering investing in a vacation rental in the Florida Keys, be prepared for a competitive market but one that promises great profitability. The key to a successful venture is knowing the market and understanding what your potential customers are looking for.

With this in mind, we discuss below the most essential things to know in buying your first vacation rental in the Florida Keys.

THINGS TO CONSIDER WHEN BUYING A SHORT TERM VACATION RENTAL IN THE FLORIDA KEYS

Florida law defines vacation rentals as “any unit or group of units in a condominium or cooperative or any individually or collectively owned single-family, two-family, three-family or four-family house or dwelling unit that is also a transient public lodging establishment, but that is not a timeshare project”.

This means that establishments like hotels, inns, and beds-and-breakfasts may not be treated as vacation rentals. Moreover, it is not considered a vacation rental if the owner lives on the property.

Vacation rentals in Florida are classified as long term and short term rentals. Short term rentals are limited to properties that are being rented out at least three times a year for a duration of no more than thirty days or one calendar month each time. Long term vacation rentals, on the other hand, refer to transient lodging that may be rented for a maximum of six months at a time.

Short term rentals in the Florida Keys

With the growing popularity of platforms like Airbnb and VRBO, short term vacation rentals in the Keys have been flourishing, catering to guests that stay anywhere from one night to 30 days or perhaps even more.

One of the best benefits of owning a short term vacation rental is that you can use the home as your very own getaway when it’s not being used by renters. If you love retreating to the Florida Keys in your free time, buying a short term vacation rental gives you the best of both worlds – a second home to escape to anytime you want and a potentially lucrative business that provides passive income.

RULES AND REGULATIONS COVERING VACATION RENTALS IN THE FLORIDA KEYS

Vacation rentals in Florida are governed by specific laws and requirements that cover everything from getting a permit to maintenance.

FINANCING A VACATION RENTAL IN THE FLORIDA KEYS

Unless you’re paying in cash, finding financing when buying a vacation rental in the Florida Keys is more challenging than obtaining a mortgage for a primary home. Government backed loans such as an FHA loan or a Hometown Heroes loan cannot be used to finance an investment property.

Conventional bank loans that conform to the guidelines set by Freddie Mac and Fannie Mae may be used but expect your lender to have more stringent requirements, including:

In addition to conventional bank loans, other financing options for an investment property include:

WHY YOU SHOULD BUY A VACATION RENTAL IN THE FLORIDA KEYS

A vacation rental in the Florida Keys offers not just a highly desirable lifestyle option but plenty of profit opportunities as well. These are some of the gains you can get for your investment.

Accelerating market values and rental prices

The long term outlook for an investment in the Florida Keys real estate is excellent. According to Zillow, home values in Monroe County where the archipelago belongs have appreciated by around 67% in the last eight years. The latest housing data show that listing prices for homes in notable Florida Keys communities such as Key Largo, Islamorada and Key West have increased by around 30% to over 50% from 2022 to 2023 alone.

The prices of vacation rentals peak in December with the highest rental price at approximately $748/night. During the low tourist season from July to October, the average rental price is $429/night .

Notably, easy access to sailing infrastructure like private docks can boost rental value. Since many vacation homes in the Florida Keys offer this sought-after amenity, they draw higher rental prices on top of a consistent stream of vacationers looking to enjoy this holiday paradise.

Premier real estate options

From stylish single-family homes to elegant villas, there is a wide range of property types to choose as your vacation rental in the Florida Keys. They typically include a host of premier amenities like upscale kitchens and bathrooms, swimming pools, and smart appliances.

The Florida Keys offers some of the finest waterfront escapes in the entire US with vacation homes sporting premium architecture and design. From elegant modern homes with upscale finishes to classy Spanish-style estates with deluxe landscaping, investors have a plethora of options to choose from when buying a vacation rental in this beautiful chain of islands.

Some of the most desirable communities in the Florida Keys include:

Competitive property tax rates

Vacation rental buyers should also take property taxes into account since they play a large part in determining long term expenses for a home. As part of Monroe County, homeowners in the Florida Keys enjoy a property tax rate of 0.67%, which is lower than the tax rates in Miami-Dade (1.01%) and Collier (0.83%). The statewide average property tax rate in Florida is 0.80%, which is lower than the US average of 0.99%.

In addition to competitive property taxes, one of the most notable benefits of living in Florida is that it is one of only nine US states that does have a state income tax. This covers everything from basic wages to pensions and Social Security benefits. Florida also has no estate or inheritance tax, which means having fewer tax returns to think about overall.

Tax Benefits

Owning a vacation rental in the Florida Keys entitles you to various tax deductions for expenses related to running the business. These expenses include:

It is also important to make sure that you meet the basic requirements for rental properties of the Internal Revenue Service to be eligible for these tax deductions. Specifically, you should also limit the personal time you spend in your vacation rental to 14 days or 10% of the total time your property is rented.

In addition, if your property is rented out for a maximum of 14 days in a year, you can enjoy the rental income tax free.

Real estate properties built to last

When choosing a home to be used as a vacation rental, it is also vital to consider the materials used in the construction. This is particularly important in the Florida Keys since many vacationers will be looking to rent waterfront homes, which are constantly exposed to coastal elements like salt air and heavy sea winds.

Look for a property that uses corrosion-resistant materials like reinforced concrete, treated wood, timber or galvanized steel cladding, and weatherproof roofing such as aluminum or clay that are more resistant to the effects of the sun and rain.

HOW TO MARKET YOUR VACATION RENTAL

As a year long holiday destination, vacation rentals in the Florida Keys are extremely popular. But while this brings great profit potential for investors, it also means plenty of competition in the market. This makes it imperative to have a solid marketing strategy that will make your property stand out from the rest.

Here are some pointers to consider:

INVEST IN THE FLORIDA KEYS WITH ANGEL DIGIORGIO

Whether you are looking to buy a vacation rental in Key Largo, Islamorada, Tavernier, or anywhere in the Florida Keys, there is no better agent to work with than Angel DiGiorgio. A Florida Keys resident for over 25 years, Angel has been helping numerous families secure their very own home or an investment property in the region for over 5 years now. With her unparalleled dedication and local knowledge, she has developed a reputation for her outstanding service, 24/7 availability, and proven-and-tested methods to close the best deals for her client in a smooth and seamless manner.

Set sail today with Angel DiGiorgio’s elite team of luxury realtors in the Florida Keys. Give them a call at 305.509.0971 or send them an email at angel(at)angelfloridakeys(dotted)com. For exclusive listings and market updates in the Florida Keys, click here.


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